Essential Functions of Goldsmith Bankers3
Advantages and Disadvantages of a Formal Banking System5
Goldsmith Bankers and moneylenders were essential functions in all places where formal banking had not yet taken root. (Black, Reading 4-3, p.2) Edward Backwell was a prominent goldsmith banker during the seventeenth century who performed many functions that a bank would normally perform. He along with other goldsmith bankers assisted in laying the ground work for today’s formal banking system. In his dealings as a goldsmith banker he facilitated trade, funded the government, and provided money for the military. The evolution of the banking system brought with the change attributes that are good and attributes that are bad, as such there are advantages and disadvantages to the creation of a more formal banking system.
Essential Functions of Goldsmith Bankers
As the mercantile revolution began and merchants flocked to the shores of England with silks and spices from the orient goldsmith bankers were used by these entrepreneurs to store the vast amount of gold they collected, and the goldsmith bankers issued loans to traders in need of capital. (“The history of money”, Wikipedia) Goldsmith bankers facilitated trade by changing foreign money, trading valuable items, accepting deposits of gold on which they paid interest and giving loans on which they charged interest. For the above transactions written paper receipts were issued and used for trade in the market place as this was safer and easier than carrying amounts of gold around in their person. These written receipts were used in the same manner that we would use currency today and their value depended on the reputation and well being of the goldsmith banker, “The goldsmith, transformed into a banker, made another discovery: he realized that putting plenty of receipts (credits) into...